PAM_334_Fall_2008_Lecture_16 - PAM3340 Lecture16 Agenda:

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PAM 3340 Lecture 16 Agenda: Combining CEO/Chairman role Key issues on board organization Fama and Jensen on boards
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Inherent Tension between Board and  Managers CEOs also influence agenda and composition  of the board Board picks the CEO so they may be  reluctant to criticize/remove CEO Large percentage of U.S. companies have  CEOs that are also the chairman of the board Costs/benefits of combining CEO and  chairman?
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Key Issues on Board  Organization Board size (number of members) Advantages versus disadvantages of more  members? Board composition Refers to ratio of “insiders” versus  “outsiders” (or “independents”) Advantages versus disadvantages of  each? Trend toward more outsiders
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Key Issues on Board  Organization (con’t) Meeting Frequency Trend toward less frequent meetings, may be due  to increased use of committees Committee structure Must have an audit committee (audit comm must  be all outsiders; NYSE rules) Can also have compensation, finance, nominating,  environmental, corp. governance committee, etc.
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Key Issues on Board  Organization (con’t) Board compensation Most paid in cash (avg. retainer of  $40,000) Trend toward incentive pay for directors:  stock, restricted stock, and options More than 50% offer options
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This document was uploaded on 10/26/2011 for the course PAM 3340 at Cornell University (Engineering School).

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PAM_334_Fall_2008_Lecture_16 - PAM3340 Lecture16 Agenda:

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